ACCT2102 SP21 Comprehensive Problem 1
ACCT2102 SP21 Comprehensive Problem 1
Answer all questions and Label all work as required
Rhiner Corporation is a manufacturer that uses job-order costing. On January 1, the company’s inventory balances were as follows:
Work in process$20,000
The company applies overhead cost to jobs on the basis of direct labor-hours. For the current year, the company’s predetermined overhead rate of $16.50 per direct labor-hour was based on a cost formula that estimated $660,000 of total manufacturing overhead for an estimated activity level of 40,000 direct labor-hours. The following transactions were recorded for the year:
Raw materials were purchased on account, $520,000.
Raw materials used in production, $465,000. All of the raw materials were used as direct materials.
The following costs were accrued for employee services: direct labor, $605,000; indirect labor, $150,000; selling and administrative salaries, $240,000.
Incurred various selling and administrative expenses (e.g., advertising, sales travel costs, and finished goods warehousing), $357,000.
Incurred various manufacturing overhead costs (e.g., depreciation, insurance, and utilities), $505,000.
Manufacturing overhead cost was applied to production. The company actually worked 42,000 direct labor-hours on all jobs during the year.
Jobs costing $1,685,000 to manufacture according to their job cost sheets were completed during the year.
Jobs were sold on account to customers during the year for a total of $2,750,000. The jobs cost $1,695,000 to manufacture according to their job cost sheets.
Required (Show all work/Calculations!)
What is the journal entry to record the purchase of raw materials?
What is the ending balance in Raw Materials? (Show T-Account)
What is the journal entry to record the labor costs incurred during the year?
What is the total amount of manufacturing overhead applied to production during the year? (Show complete calculations)
What is the total manufacturing cost added to Work in Process during the year?
What is the journal entry to record the transfer of completed jobs that is referred to above?
What is the ending balance in Work in Process?
What is the total amount of actual manufacturing overhead cost incurred during the year? (Show T-Account)Is manufacturing overhead underapplied or overapplied for the year? By how much?
What is the cost of goods available for sale during the year? (Show complete calculations)
What is the journal entry to record the cost of goods sold referred to above?
What is the ending balance in Finished Goods? (Show T-Account)
Assuming that the company closes its underapplied or overapplied overhead to Cost of Goods Sold, what is the adjusted cost of goods sold for the year?
What is the gross margin for the year?
What is the net operating income for the year?
It is recommended that you work through all journal entries, t-accounts and schedules/statements to correctly formulate your answers.
Rhiner Company prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 500 units to 1,500 units):
Variable expenses 10,000
Contribution margin 15,000
Fixed expenses 8,000
Net operating income $ 7,000
(Answer each question independently and always refer to the original data unless instructed otherwise.) (Show all work/calculations. No credit will be given without showing your work and/or calculations.)
What is the contribution margin per unit?
What is the contribution margin ratio?
What is the variable expense ratio?
If sales increase to 1,001 units, what would be the increase in net operating income?
If sales decline to 950 units, what would be the net operating income?
If the selling price increases by $4 per unit and the sales volume decreases by 200 units, what would be the net operating income?
If the variable cost per unit increases by $2, spending on advertising increases by $1,000, and unit sales increase by 240 units, what would be the net operating income?
What is the break-even point in unit sales?
What is the break-even point in dollar sales?
How many units must be sold to achieve a target profit of $7,500?
What is the margin of safety in dollars? What is the margin of safety percentage?
What is the degree of operating leverage?
Using the degree of operating leverage, what is the estimated percent increase in net operating income of a 10% increase in sales?
Assume that the amounts of the company’s total variable expenses and total fixed expenses were reversed. In other words, assume that the total variable expenses are $8,000 and the total fixed expenses are $10,000. Under this scenario and assuming that total sales remain the same, what is the degree of operating leverage?
Using the degree of operating leverage that you computed in the previous question, what is the estimated percent increase in net operating income of a 10% increase in sales?
Your work must be in electronic form and uploaded to the assignment folder in D2L by the designated due date. Work in picture form, pdf form or handwritten form or Late submissions will not be accepted. There are worksheet forms within the assignments covered in class that may assist you in completing this assignment in Excel.